July 21, 2011 / 3:23 PM / in 6 years

UPDATE 4-Weak U.S. housing market hits Ingersoll profit

* Q2 EPS from continuing ops $0.88 vs. expected $0.93

* Q2 revenue rises 12 pct to $3.89 billion

* Says remodeling, home building markets stagnant

* Shares down 7.3 pct

* Does not change its full-year forecast (Adds analyst and CEO comment, updates stock activity)

By Nick Zieminski

NEW YORK, July 21 (Reuters) - Ingersoll Rand Plc (IR.N) reported a lower-than-expected quarterly profit on Thursday because of weakness in its residential unit that makes home air conditioners and locks, sending its shares down 7.3 percent in morning trading.

Ingersoll, which makes industrial air compressors and security technology including Schlage locks, said remodeling and home building markets remained “stagnant.”

Residential HVAC and security accounts for a smaller portion of Ingersoll revenue than its commercial offerings, but remains exposed to North American markets. The residential business was the only Ingersoll division with lower sales, orders and margins in the quarter.

“We see a continuation of a challenging backdrop in the residential market, as single family housing starts and consumer confidence remained at low levels,” Ingersoll chief executive Mike Lamach said on a conference call.

Net earnings fell to $92.3 million, or 26 cents per share, from $196.6 million, or 58 cents per share, a year earlier.

The results included a charge related to the sale of Ingersoll’s Hussmann unit, a maker of refrigerated display cases for retailers. Profit from continuing operations was 88 cents per share, 5 cents below expectations.

Sales rose 12 percent to $3.89 billion, matching average analyst estimates.

Lamach said the company was on track to sell Hussmann by the end of the third quarter, but would not comment on the likely price the unit would fetch. In March, sources said it would likely sell for less than $1 billion. [ID:nN09281765]

The company’s industrial segment, which makes compressors, tools and utility vehicles, raised profit margins to a record level and boosted international sales by a third, helped by Asian demand.

The company’s climate unit, which includes Trane commercial air conditioners, showed stronger demand for equipment than for parts and service. Margins expanded there as well.

Global industrial and refrigerated transport markets are recovering, Asian markets are strong and demand for commercial heating and cooling systems is slowly recovering in North America, it said.

It forecast third-quarter profit from continuing operations between 85 cents and 95 cents per share. Analysts expected 98 cents per share, according to Thomson Reuters I/B/E/S. It did not change its full-year forecast.

Ingersoll shares fell $3.28 to $41.49 on the New York Stock Exchange.

HOUSING CHILL

United Tech, parent of Carrier, the world’s No. 1 maker of heating and cooling (HVAC) equipment, this week also noted weakness in residential demand for air conditioners.

“We’re still only about 60 percent of peak demand and we’re probably not going to get back to peak until we see housing pick back up,” United Tech’s finance chief Greg Hayes said.

Referring to Apple Inc’s (AAPL.O) strong quarterly earnings results this week, Hayes joked, “If it touches the consumer, unless you put an Apple on it ... it’s not moving.”

Carrier, however, grew profit margins, said Jeff Sprague, managing partner with Vertical Research, so Ingersoll’s problems cannot be blamed solely on a cool spring or the reduction of energy tax credits.

“It raises some fairly big questions about the back half,” Sprague said, adding that Ingersoll appears to be losing market share to Carrier. “The real miss is execution on profit. There’s an operational problem here.”

Ingersoll named the chief of its Club Car business to run the residential business. Gary Michel, a 26-year company veteran, will replace Steven Hochhauser, who is leaving.

Ingersoll’s disappointing results could affect earnings expectations for Emerson Electric Co (EMR.N), whose climate business makes compressors, thermostats and electronic controls and is heavily reliant on residential markets.

Forecasts for Lennox International (LII.N), which derives most of its business from North America, and for distributor Watsco (WSO.N), may also come down. Both report next week.

Parker Hannifin (PH.N) and Regal-Beloit Corp (RBC.N) also participate in the HVAC market. Emerson, Parker and Regal-Beloit are set to report results next month. (Additional reporting by Scott Malone. Editing by Derek Caney, Ted Kerr and Robert MacMillan)

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